TAX TREATMENT OF ACCOMMODATION FACILITY PROVIDED BY THE EMPLOYER

With booming salary packages, Indian corporate have also started proving accommodation facility to their top level executives. It is a perquisites as per Income Tax Act, 1961. Let us understand the tax of it.

Relevant terms:

a. Accommodation includes flat, farm house or part thereof or accommodation in a hotel , motel , service apartment ,guest house, caravan ,mobile home , ship or other floating structure .

b. Hotel includes licensed accommodation in the nature of motel , service apartment or guest house. Accommodation provided in a hotel will not be a taxable perquisite if –

The period of such accommodation does not exceeds 15 days, and

Such accommodation has been provided on the transfer of the employee from one place to another.

Value of unfurnished accommodation provided by the government :

As per explanation 1 to sec.17 (2), value of taxable unfurnished accommodation provided by the central or state government shall be as computed under-

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License fee determine by the government,xxx

Less : rent recovered from the employee,(xxx)

Value of taxable unfurnished accommodation,xxx[/mable]

3. Value of unfurnished accommodation provided by employer other than govt: as per explanation to sec. 17 (2)

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particular,Rs.

Computation of salary for valuation of accommodation facilities~~1.Basic salary~~2.D.A. if considered for retirement benefits~~3.Bonus or commission or ex- gratia~~4.All taxable allowance~~5.Any other monetary payment,xxx

Salary for the purpose of valuation of accommodation facilities,xxx

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a. Owned by the Emloyer

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Place of accommodation,cities having population exceeding 25 lakhs as per latest census,cities having population 10 lakhs but not exceeding 25 lakhs as per latest census,other places
Gross Amount,15% of the salary,10% of the Salary,7.5% of the salary
Less:Recovery,Rent recovered from the exmployee,Rent recovered from the exmployee,Rent recovered from the exmployee
Net Value
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b.Not owned by the employer-taken on lease by employer

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Rent paid by the employer or 15% of the salary , whichever is lower

Less: rent recovered from employee

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c. Accommodation in hotel

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24% of salary or actual charges , whichever is lower

Less : amount paid or payable by the employee
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4. Value of furnished accomodation
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Value of unfurnished accommodation as above~~Add : value of furniture~~If owned by employer then 10% p.a. of original cost of such furniture~~If hired from third party then actual hire charges,xxx
Less: any charges paid or payable by the employee,XXX
Value of furnished accommodation,XXX
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5. Valuation not applicable in certain cases :

a. Employees – the above rule of valuation is not applicable for accommodation provided to an employee working at

Mining site

Offshore site

Dam site

Onshore oil exploration site

Project execution site

Power generation site

b. Condition

The accommodation should be of a temporary nature

Plinth area should not exceed 800 square feet

Accommodation should be located atleast 8 kms away from local limit of municipality/ cantonment, or on latest published all – India census.

6. Employees on deputation :

When the accommodation is provided by the central government or any state government to an employee who is serving on deputation with any body or undertaking under the control of such government –

a. The employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation , and

b. Value of perquisite of such an accommodation shall be the amount calculated as similar with accommodation is owned by the employer.

7. Employees on transfer:

a. For the first 90 days of transfer: where accommodation is provided both at existing place of work and in new place , the accommodation , which has lower value , shall be taxable.

Hey readers, welcome to my blog investsaver.com. I am Chartered Accountant by Profession and I love to write on tax & money matters. You may ask your queries through comments related to the topic, I will be happy to answer them.